The running shoe market is a monopolistically competitive market. Firms in the running shoes market are making an economic profit. Do you expect firms to enter the running shoes market or exit from that market in the long run? ... When a firm in a monopolistically competitive market is making an economic profit, OA. we don't expect firms to enter the market in the long run because of barriers to entry OB. we expect firms to enter the market in the long run OC. we expect firms to enter the market in the long run only if new firms will have excess capacity OD. we expect firms to enter in the long run only if they have zero markup OE. we don't expect firms to enter the market because increased competition will eliminate excess capacity Next Canv suppo d? =

The running shoe market is a monopolistically competitive market. Firms in the running shoes market are making an economic profit. Do you expect firms to enter the running shoes market or exit from that market in the long run? ... When a firm in a monopolistically competitive market is making an economic profit, OA. we don't expect firms to enter the market in the long run because of barriers to entry OB. we expect firms to enter the market in the long run OC. we expect firms to enter the market in the long run only if new firms will have excess capacity OD. we expect firms to enter in the long run only if they have zero markup OE. we don't expect firms to enter the market because increased competition will eliminate excess capacity Next Canv suppo d? =

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter10: Monopolistic Competition And Oligopoly

Section: Chapter Questions

Problem 1.1P

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Continuing with the scenario in question 1, in the long run, the positive economic profits that the monopolistic competitor earns will attract a response either from existing firms in the industry or film outside. As those films capture the original films profit, what will happen to the original films profit-maximizing price and output levels?
Aside from advertising, how can monopolistically competitive films increase demand for their products?
What is the relationship between product differentiation and monopolistic competition?
Suppose that, due to a successful advertising campaign, a monopolistic competitor experiences an increase in demand for its product. How will that affect the price it charges and the quantity it supplies?
The American market for shoes is a good example of monopolistic competition. In a situation where Adidas is earning a large economic profit in the short-run, Nikemay try to increase their advertising to capture some of that business, If Nike is successful in their campaign, what would happen to the demand curve for Adidas and the price at which they can sell?O a. The demand curve shifts up and to the right, and the price rises.O b. The demand curve shifts up and to the right, and the price falls.O c. The demand curve shifts down and to the left, and the price walls.O d. The demand curve shifts down and to the left, and the price rises.Oe. Nike cannot affect the demand for Adidas since this is a monopolistically competitive market.
Suppose that a company operates in the monopolistically competitive market for electric razors. The following graph shows the demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve for the firm. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. PRICE (Dollars per razor) 100 90 8 70 60 50 40 30 20 10 0 D MO 10 ATC MR 20 30 40 50 60 70 QUANTITY (Thousands of razors) 60 Demand 90 100 Mon Comp Outcome Min Unit Cost
1. Is a monopolistically competitive firm productively efficient? Is it allocatively efficient? Why or why not? 2. What stops oligopolists from acting together as a monopolist and earning the highest possible level of profits? Is there a way for oligopolists to attempt to maximize profits? What are the risks of such attempts (and utimately, generally cause such attempts to fail)?
Which of the following is a difference between a monopolistically compettive market and a monopoly in the long run? OA. Firms in a monopolistically competitive market eam zero economic profits in the long run, while a monopolist incurs losses in the long run. B. Firms in a monopolistically competitive market charge a price higher than marginal cast in the long run, while a monopolist charges a price equal to marginal cast in the long run OC. Firms in a monopolistically competitive market car zero economic profits in the long run, while a monopolist usually carns positive economic profits in the long run. OD. Firms in a monopolistically competitive market charge a price lower than merginal cost in the long run, while a monopolist charges a price equal to merginel cost in the long run.
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